South Korea to Slowly Ease Regulations on Banks

South Korea's financial authority said on Tuesday that the country's loosened banking laws will be gradually phased away beginning in the second half of this year.

The Financial Services Commission (FSC) announced in a statement that the loan-to-deposit ratio threshold for lenders would be normalised beginning in July. The ratio was reduced from 100% to 105% late last year in response to a credit bottleneck in local financial markets, and it was extended early this year amid global banking turbulence.

The liquidity coverage ratio (LCR) requirement - a percentage of net cash outflows that each bank must keep as highly liquid assets - will be increased to 95% for the second half of this year, up from 92.5 percent currently.

The degree of further tightening of the LCR requirement, which was lowered during the COVID-19 pandemic, will be determined at the end of this year with consideration of market conditions, the FSC said.

"In case of an unexpected financial market crisis, the government will proactively review and swiftly implement necessary measures such as a pause on normalisation or easing of regulation ratios," the FSC added.